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The Shrinking Middle Class __ A World Without Work

The trends in the graphs below are not healthy for any society. It is not the inequality itself that is worrisome, but the trends. Ignoring the top 1%, look closely at the differences between the top twenty percentile and the lower percentiles.

Inequality exist in all economic systems. But, in the US after World War II, capitalism proved beyond a doubt that it could provide the rising tide that could float the most boats. However, the middle class has not done well in recent decades. That is especially true since the turn of this century which has seen a steady decline in the workforce participation rate. You, dear readers, know most of the numbers. During the 2012 presidential campaign, the Romney campaign and conservative bloggers were reporting the bad numbers every day. This source list sixty examples of middle class decline. I’ll share just a few:

#1 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

#3 Median household income in the U.S. has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.

#4 The U.S. economy continues to trade good paying jobs for low paying jobs. 60 percent of the jobs lost during the last recession were mid-wage jobs, but58 percent of the jobs created since then have been low wage jobs.

#6 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.

#13 In 1989, the debt to income ratio of the average American family was about58 percent. Today it is up to 154 percent.

#15 While debt loads for middle class families are going up, the net worth of those same families is going down. According to the Federal Reserve, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.

#20 The unemployment rate for Americans in the 18 to 29 year-old age bracket is 11.5 percent overall. For African-Americans in that age group, the unemployment rate is now up to 22.1 percent. Millions of young people believe that the system has totally failed them.

#21 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

#52 Corporate profits as a percentage of GDP are at an all-time high. Meanwhile, wages as a percentage of GDP are near an all-time low.

The GDP today is higher than it was before the 2008 recession; yet. there are between five and six million less Americans working today. Think about that. American companies are making record profits by producing and selling more goods and services with millions fewer workers. However, government’s workforce has increased; so for the overall workforce to have fallen five or six million, the reduction in the private workforce was even greater. Is it any wonder that about 50% of Americans pay no federal income tax. Included in that number are people who were in the upper percentiles of income and after retiring are no longer paying taxes. Most are people who have jobs that don;t pay enough to make them tax payers and, of course, it includes the unemployed and the welfare class.

Here are some frightening numbers. The federal government spending accounts for 25% of GDP. But, over forty percent of the money our government spends is borrowed. That means 9% of our GDP is supported on borrowed money.

Who Do We Blame? We tend to blame progressive government policies. We know that over regulation and over taxing drives companies, and there jobs, to more business friendly countries. As a result, America’s lower class lives better than most people in this world. America’s middle class is shrinking and the lower class is growing. But, in spite of jobs exported to other countries, the world’s biggest economy is still growing at about 2% per year on average. What we rarely talk about is the advances in technology that let fewer people produce all the goods and services we demand. What’s more is that those fewer people are paying, through their taxes, for the improved living standard of America’s lower class.

What took a century to occur in America will take place in a decade or two in countries like China and India. Their growing middle classes will demand a higher standard of living, their costs to produce goods and services will rise and they will apply technology to try to stay competitive and their middle class growth will stop.

In spite of what environmental extremist say, technology will make it possible for fewer people to produce all the food and housing and potable water and other basic needs of the world’s population. What technology does not produce is enough jobs to keep people occupied. From a recent New York Times article titled A World Without Work, the author says:

Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.

So, what happens say in twenty years when 60% are not paying federal income taxes and 40% are paying for the safety net? What happens when 100 million Americans are on food stamps? What do so many people do with all that “leisure” time on their hands? Will they, as some portend, accept their dependent life and use their free time to enjoy hobbies or improving their minds? That’s not what we see in the inner-cities, is it? Will the growing non-productive class revolt against the shrinking productive class? Or, will the few of the productive class grow tired of supporting the many of the non-productive class?

20 thoughts on “The Shrinking Middle Class __ A World Without Work”

As we worry about our own future, much of the world is in the same boat. At least at this point we have enough to eat. Wait until hunger stalks the world. But then, the Progressives have been saying there are far to many of us. What a coincidence isn’t it.

As long as we maintain the present rigged democratic system where the “many” -with less to give and to contribute – dictate over the “few” – with more to give and to contribute – our political class will pamper and seek favor from the “many”. The process will inevitably grow the welfare state which is the main supplier of unemployment and economic stagnation and the creator and permanent sustenance of the lower class which in time will creep into the middle class. (it is also a question of definitions of these classes)

The minority – the producer class – will be pushed and pressure to give more to a point where they will vanish. Nothing new, Europe is our model that we refuse to acknowledge. Without a way to sustain both, a permanent welfare underclass and a strong military, our world hegemony will vanish.

what are you going to do? With the flood of low skill labor being invited into this country, and those that are educated soon retiring, those good jobs won’t be back. Do we go socialist/communist and sock it to those that still can produce, or do we go soylent green?
We may not get that answer, but I bet our children will.

The problem with our ability to utilize technology in manufacturing is, obviously, that fewer humans will be required. If you look at Marx, one could argue that his projected outcome of capitalism was simply too early. When the means of production are truly controlled by a small number of wealthy capitalists, leaving workers out in the cold, is when the workers are no longer necessary because machines can do all the work. Literally, it is the capital (the machines) that do everything. Thus, the riches will also accrue only to the “capitalist,” the guys at the top that own the machines.

We’re clearly not nearly there yet, but we are getting closer. When that day comes, we’d better have a plan.

In the meantime, we act like we’re already there, with government subsidizing people NOT working. What this is doing is depriving us of the best kind of capital: human capital. It is the human beings who create and innovate. Making it hard for them to do so, or paying them not to do so, gets us stuck in the mushy middle, where we aren’t creating things that will make life like Star Trek (every person pursuing their passions, “credits” to spend just for being alive, machines that simply make for you anything you ask for by rearranging matter whether it be food or clothing or anything else), and instead we’re in a miserable existence where jobs are hard to come by, the government is handing out a subsistence living, and the people who are still working and creating and running companies are getting pummeled by taxes and regulations that act as a disincentive to do more, or even keep doing what they’re doing.

I’ve always said that a time may come when Marx will be right and communal ownership of the means of production will be a good idea, but that that time will ONLY come when people are no longer necessary to production and we can literally get all we need without having to usurp someone else’s labor (or capital) to do it. As I said, we’re far from there yet, and trying to set things up like we are there prevents us from getting there because it kills human capital and punishes productive behavior.

Here in Northern Virginia, what is hitting the middle class is the ever-increasing real estate tax. Property assessments are down, yet we’re paying more in tax dollars every year. Those with government jobs keep getting raises, but those with jobs in private industry — particularly those who are not sitting at the top as CEOs or the like — do not.

You make an excellent point, AOW. Most bloggers talk only about the fedral government attcks on our wallets, but the local and state governemts have been digging the same holes and so are raising taxes wherever they can. The middle class gets it from every direction.

I’m concerned about the devastation of the middle class, but unlike the Democrats, I’m not blaming the top 1% for the shrinking middle class. The fact of the matter is, it’s not a zero sum game. Incomes for the middle class haven’t been shrinking because CEO’s get paid well, or because hedge fund managers make a fortune, or because anybody else is accumulating a vast fortune. Any educated person ought to know that. The middle class in this country is shrinking because of low wages elsewhere in the world that caused our wages to be relatively too expensive to be competitive; and because our education system is inferior; and because we have no discipline whatsoever; and because the middle class is getting taxed to death and taking care of an increasingly large dependency class; and because of other economic dislocations vis-a-vis the rest of the world. It’s NOT because the rich are getting richer. The rich are getting richer everywhere in the world. It’s important to recognize this fact, because otherwise people are stupid enough to vote for Democrats, thinking the Democrats’ demagoguery about the rich is going to get middle class people a better job and better wages, when in fact the Democrats’ policies are what are crushing American competitiveness and sucking the life out of the private sector, and sucking every tax dollar out of the middle class that they can in a pathetic socialistic spiral guaranteed to land us on the ash heap of history, even before we were scheduled to do so. As for me, I was hoping it wouldn’t happen before I died, or perhaps before my kids died, but it’s happening right now, and I’m going to have to live through it, due to those idiots.

“…when in fact the Democrats’ policies are what are crushing American competitiveness and sucking the life out of the private sector, and sucking every tax dollar out of the middle class that they can in a pathetic socialistic spiral guaranteed to land us on the ash heap of history, even before we were scheduled to do so.”

You summed it up very well, Ray. Thanks for the excellent comment! I fear that our education system has produced an electorate that is not capable of changing the direction away from big government. Of course, that has ben the plan of the progressives for the last 100 years.